COVID-19 pandemic accelerates construction job cuts in the Gulf

COVID-19 pandemic accelerates construction job cuts in the Gulf

Lay-offs and redundancy activity has accelerated in the Middle East’s construction sector as it contends with the economic impact of COVID-19, says GlobalData, a leading data and analytics company.

Neha Bhatia, Construction & Infrastructure Editor GlobalData, comments: “Job cuts were occurring across the Gulf construction industry even prior to the COVID-19 pandemic – largely due to a decline in new projects being brought to the market in 2019 while current projects were being completed. However, COVID-19 appears to have accelerated the problem.”

Data from GlobalData’s Middle East projects tracking database shows that UAE contract awards in the first quarter of 2020 recorded the worst first-quarter performance in five years. This downward trend is replicated in other parts of the GCC, with contract awards also declining during April.

Bhatia continues: “As opportunities to win new work diminish and project pipelines shrink, regional construction employers are making redundancies to reduce costs. Tendering opportunities appear to have particularly diminished for contractors, further lowering demand for skilled workers in the sector.”

Several projects have been delayed or shelved due to lowered market liquidity amid global oil price volatility and COVID-19, but pre-construction activities are proceeding for a select few developments that are expected to be financially successful in the long term. This trend has kept consultancies relatively busier than contractors during the pandemic.

Numerous large consultancies, both local and international, have also made redundancies in recent weeks in the region. Some construction employers are pursuing alternatives to reduce workforce costs such as interim pay deductions, shorter working weeks or taking annual leave at home. But there is a significant long-term risk to the region of these measures.

Bhatia adds: “Many unemployed expatriates in the Gulf will be unable to afford the high cost of living in the region and many will decide to leave the region, leaving a skills shortage when the market recovers.

“If employers in the Gulf do not treat their employees well through this difficult period, they may not get another shot at re-hiring staff that they have invested so heavily in, and those that have the experience of working in the Middle East.”